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  • AUD/USD witnessed a dramatic turnaround following an early move up to multi-week tops.
  • The tighter than expected US election results drove some aggressive flows towards the USD.
  • A sharp fall the equity markets benefitted the safe-haven USD and contributed to the slide.

The AUD/USD pair maintained its offered tone through the early European session and was last seen trading below the 0.7100 mark, still well above daily swing lows.

The pair faded an intraday bullish spiked to levels beyond the 0.7200 mark, or over three-week tops amid a strong pickup in the US dollar demand. The fact that early results of the US election indicated a tighter than expected race for the White House, investors rushed to buy the greenback in order to hedge their positions.

Meanwhile, incumbent President Donald Trump called the election a fraud and said that he plans to go to the Supreme Court. The US political uncertainty took its toll on the global risk sentiment. This was evident from a steep decline in the US equity futures, which provided an additional boost to the greenback’s safe-haven status.

A broad-based USD strength, along with the downbeat market mood exerted some heavy pressure on the perceived riskier Australian dollar. The AUD/USD pair, however, managed to find some support near mid-0.7000s as market participants now seemed reluctant amid growing wariness about the actual outcome of the US elections.

It is worth mentioning here that there will be a delay in results from key battleground states – Wisconsin, Michigan and Pennsylvania. The heightened uncertainty might continue to underpin the safe-haven USD and keep a lid on any meaningful recovery attempt for the AUD/USD pair.

Moving ahead, Wednesday’s US economic releases – the ADP report on private-sector employment and ISM Services PMI – are more likely to be overshadowed by the political developments in the world’s largest economy.

Technical levels to watch